Friday, 18 October 2013

With no Indian orders, BAE Systems starts shutdown of M777 gun factory

An M777 gun crew readies their gun for airlifting by a Chinook helicopter in Afghanistan

By Ajai
Shukla

Business Standard, 18th Oct 13

The
ministry of defence (MoD) today moved closer to paying thousands of crore rupees
extra for artillery guns for its mountain divisions. BAE Systems, which is
supplying M777 155 millimetre (mm)/39 calibre ultra-light howitzers, today initiated
the shutting down of its production line in the UK, in the absence of any order
or commitment from New Delhi.

Announcing
the mandatory “consultation with trade unions” at its facility at
Barrow-on-Furness, UK, which could cut 200 jobs, the company stated that the
move “comes about because of on-going delays in the US Government Foreign
Military Sale of 145 M777 howitzers to the Government of India. After months of
company investment, and with production on existing orders nearing completion,
the Company can no longer continue to maintain the current staffing levels.”

The
production line at Barrow-on-Furness produces core components like titanium
forgings and fabrications, which make the M777 light enough to be lifted by
helicopters to high-altitude deployment areas. The gun is finally assembled at
BAE Systems’ Hattiesburg facility in the US. For that reason, India has pursued
this procurement through the US Department of Defence (Pentagon) under the
Foreign Military Sales (FMS) programme. This means that India buys the gun from
the Pentagon, which negotiates terms with BAE Systems.

There have
been clear warning signals that MoD delay would result in a higher price for
the M777. Business Standard had reported (Aug 20, “MoD delays raise light
artillery cost by thousands of crore”) that, on Aug 7, the Pentagon notified
the US Congress that it was raising the maximum price of the sale to India from
US $647 million, which had been notified in Jan 2010, to $885 million.

That escalation
and the rupee depreciation could almost double the contract price from Rs 2,960
crore in Jan 2010, to Rs 5,610 crore today.

Industry
sources say that BAE Systems, which has supplied over a thousand M777 guns to
several armies but now has no orders in hand, has already spent $50 million in
keeping the production line open in anticipation of an order from New Delhi.

Contacted
for a comment, an MoD spokesperson said today that the BAE Systems decision was
“an internal matter of the company” and that New Delhi had nothing to say.

While some
cost escalation seems inevitable for India, BAE Systems indicated today that an
early decision could limit the damage. “There could be some mitigation of the
proposed suspension in production and potential reductions, if a formal
agreement for the M777 howitzer sale to India was reached in the near future.
However, the company has reached the point where it has to begin this
consultation process (with the employees that could be laid off),” the
statement said.

Says Dean
McCumiskey, who heads BAE Systems in India: “BAE Systems stands ready to
continue to support any discussions between the two Governments to bring this
case to conclusion, and remains committed to equip the Indian Army with next
generation technology to meet their urgent operational requirements."

Indian Army
officers say the M777 is crucially required, especially for the new mountain
divisions that have recently been raised for the Sino-Indian border. The
initial order for 145 guns could rise significantly, since the army’s 220
artillery regiments have received no new artillery since the 1980s, when the
FH-77B, 155 mm/39 calibre Bofors gun was bought. Mired in controversy,
eventually only 400 Bofors guns were delivered.

An
indigenous effort by the Ordnance Factory Board (OFB) to build a 155 mm/45
calibre gun has run into trouble, with a gun barrel bursting during trial
firing recently. Separately, the Defence R&D Organisation (DRDO) is
partnering the private sector in developing a 155 mm/52 calibre artillery gun.

Now India should buy the production line instead of the gun. It makes sense. Few years back France had offer us the Mirage 2000 production line as it was getting closed. India refused and we are still repenting. Or we can allow some other Indian private firm to buy it with a confirm order of Indian army.

1. BAE Systems may have supplied 1000s of the guns but if there are no more current orders and if the production line was totally dependent on a future Indian order, was it not a risk that we were going to take alongwith providing employment in a foreign country and no technological benefits to our own indigenous, if any, defence production capability.

2. We are willing to let go of an oppourtunity to get hold of a good gun system now to buy something of the same in the future at an escalted cost. This seems to be the fallout of the mulitiple 'scams' which the current government is facing with the rsult that they are in slow-go mode so that no further allegations can be brought against them. No matter what happens to our defence preparedness! And then our Chiefs will have to give a statement that the Indian Armed Forces will give a good account with whatever we have. Sad to say the least.

3. Thirdly, the Tata's had showcased an artillery piece. After they had shown one piece, there has been no further information in this regard.

4. Lastly, if the procuction line is going to be shut down then instead of just going for the guns can't we go in for the purchase of the complete production line. It might be costly but it has been done in the past specifically by China.

Is it a real shutdown or a pressure tactic to speed up Indian officials and the present minister of defence who is slow to act?

Our defence minister is listening to all complaints which mostly are false in case of government to government contracts, but he is listening.

BAE system got tired of waiting and decided to put pressure on the Indians by threatening to close the assembly down.

I have suggestion, - relocate the closed down plant to India, since the Americans/British do not need it. Then India is self sufficient in artillery production.

Army brass are acting like spoiled babus. They do not wish 39 caliber system. They rather have 45 caliber or 52 caliber stuff or none at all. Very strange thinking for an army which is short artillery.

It is a hopeless situation all round. With this rate of wespon procurement and state of preparedness India might as well cede territory and also erase such words "future superpower" and "blue water navy" from our vocabulary.

sorry for being a naïve civilian, but cant we just buy the Singapore alternative. it can also set a precedent with buying weopens from tainted companies after imposing a severe monetary fine & in exchange of support in ongoing corruption investigations rather than putting an blanket ban on buying any product from that company if that product is found to be vital to be procured in national interest

I have seen many nations who are great economy / military powers. They all have strict policies of Producing indegenous and Use by military.

Once Russian Chief of Exports said the same : Indians can Never be Economic / Military power till they import. let ur soldiers fight with sticks, stones, revolvers.. but make them fight with home made things.... u will see in 3 - 10 years u will have best technology and production line in ur place....